What Is Insurance Subrogation and How Does it Work?

Key Points:

  • If your insurance company pays for accident-related expenses and later finds out another party was responsible for the crash, they may seek reimbursement, or what’s known as insurance subrogation.
  • Not every company that seeks subrogation from your settlement may be entitled to it. Paying a subrogation claim that was not enforceable can cost you substantially.
  • A personal injury attorney can help identify the parties eligible for subrogation and ensure you only pay what is required.
Insurance Subrogation

After being in a car accident, you may have bills and expenses related to the accident and your medical care. In some cases, your auto or medical insurance providers may pay for related expenses, such as medical bills, car repairs, or property damage related to your accident. But because the at-fault party (or their insurance carrier) is the one responsible for paying for such damages, your insurance provider may want reimbursement for any expenses they previously paid out. This is what is known as insurance subrogation.

If you learn that an insurance provider is seeking subrogation, it can certainly be alarming, and you likely have many questions. Here’s what you should know about subrogation and how it can affect your auto insurance claim or reimbursement.

How Insurance Subrogation Works

When an insurance carrier is seeking subrogation, it is typically because another party was found to be all or partially at fault for the accident. The subrogation process allows an insurance carrier to seek reimbursement for the costs for which it should not be responsible.

Here’s a common example: Say you were injured in a car accident and visited a hospital or doctor for treatment. Before being seen, you provided your medical insurance information, just as you would for any typical medical care. The medical facility would then send your bills to your insurance provider, which would make payments according to your policy.  

However, if it is later found that another driver was at fault for the accident, and you receive a settlement for your claim, then your insurance provider may seek reimbursement for the costs it previously paid out for the injuries related to the accident.

The theory behind subrogation is that your insurance provider should not be responsible for paying for expenses caused by another driver, nor should you receive coverage twice – once when your insurance pays for your care and again when you receive reimbursement for medical expenses from an accident claim.

How Does Fault Impact the Subrogation Process?

Some states follow what is known as “comparative negligence,” which means that you can recover damages from an accident even if you were 99% at fault. However, Georgia follows the law of “modified comparative fault.”

According to Georgia code O.C.G.A. §51-12-33, damages may be recovered if you were partially at fault, as long as you were not more than 50% to blame for the accident. For example, if you were rear-ended but your brake lights were not working at the time, and the other driver argues that he could not tell you were stopping, then you will likely be partly at fault. While the other driver may still bear the majority of the blame for the accident, you may be deemed to have contributed to it.

If you are found to be partially to blame for an accident in Georgia, the amount you can recover would be reduced by the percentage you were found at fault. For instance, if you were found 30% responsible, your recovery may be reduced by 30%.  In that scenario, you may only be able to recover 70% of your damages. 

This analysis is important in the subrogation process because each driver’s level of responsibility for the accident must be assessed before a final determination can be made regarding what amount each insurance carrier will be required to pay for an injured party’s damages. This final determination may then impact the insurance company’s subrogation claim against you.

Does Georgia Law Protect Accident Victims Against Insurance Subrogation?

Under Georgia law, O.C.G.A. §33-24-56.1, some insurance policies only allow an insurance company to recover money paid for your medical bills if you have been “made whole.” This means that the amount you received from your claim must exceed the total of your damages – both economic (medical expenses, lost wages) and non-economic (pain and suffering) – you suffered due to the accident. You are only considered “whole” if you have been compensated for everything you lost. If you do not recover all your damages, the insurance company will be unlikely to recover what it paid on the claim.
The rationale behind this law is that in a situation where either the insurer or the insured may have to go unpaid for certain expenses, the loss should fall to the insurer because it has already been paid a premium for assuming this risk. Additionally, the insurance company would have been obligated to pay the insured’s medical expenses regardless of whether the insured was negligent or a third party was found responsible for the accident.

What Is an ERISA Plan and Does Subrogation Apply to Them?

Insurance claims can become more complicated when the Employee Retirement Income Security Act (ERISA) of 1974 is involved. Although an insurance company cannot typically recover when the settlement amount is less than your damages and you have not been “made whole,” insurance policies covered by ERISA are often not subject to this rule.
Generally, if the policy is a legitimate ERISA plan, then the insurance company has a right to subrogate most or all the benefits it paid out. ERISA policies have these greater rights to subrogation because they are “self-funded,” meaning they are paid for entirely by the premiums of the members (employees) paying into it. Alternately, general insurance policies offered to the public, often through employers, can more effectively absorb losses because they are funded by premiums from people all over the state or country.
This means that ERISA plans can claim a greater portion of your settlement. However, many insurance companies will insist upon certain reimbursements under ERISA policies, even if they are not entitled to them. When dealing with an ERISA plan, it is essential to hire an experienced personal injury attorney who can explain and fight for your rights.

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Do All Accident Claims Involve Subrogation?

Whether or not insurance subrogation will apply to your accident claim depends upon who paid the bills and if they have a right to be reimbursed. It’s important to note that not every company that seeks subrogation from your settlement may be entitled to it. Paying a subrogation claim that was not enforceable can cost you substantially.

However, if your insurer has a legitimate subrogation claim for expenses paid due to someone else’s negligence, then you may have an obligation to repay your carrier from your settlement.

Unfortunately, reimbursement demands might not be made against a settlement until the claim has closed. This means the amount the injured party accepted in a claim may not have considered the subrogation cost, and therefore, the compensation they get to keep may be significantly reduced.

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